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Rob Marris (Wolverhampton, South-West) (Lab):
May I urge my hon. Friend to resist the siren voices of the Liberal Democrats? While they have a certain track record in one sense, they focus exclusively on the short term. Short-term measures are important, but I urge my
hon. Friend to continue, as the Government have, not only with short-term measures but with medium-term measures, which the Opposition are overlooking, such as the new Bretton Woods agreement that we need, increasing house building in the UK to address the problem of undersupply and therefore of over-inflation in house prices; carrying on with training for the skills we will need when the economy picks up again; and carrying on with measures such as changes to the pension system so we do not end up a basket case, which Italy will be in about 10 years’ time?
Angela Eagle: I always do my best to avoid siren voices, but my hon. Friend is right to point out that, despite all the diverting and difficult things going on in the immediate term, it is important at times such as these to look through the sound and fury to the medium term, and to ensure that, in the areas my hon. Friend mentions, the Government position this country’s economy so it can get through in the best possible shape.
The scale of the problem caused by the disruption we have all been experiencing in the global financial system is enormous. As the International Monetary Fund said last month, the world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s. As a result of the credit crunch, we have already seen falling output in Germany, France, Italy, Ireland, Japan and Canada, and we now also hear that the USA is in recession. We are now seeing falls in output in the UK, too.
Two weeks ago, the Bank of England’s financial stability report estimated sub-prime and related losses at almost $3 trillion, and it is clear that there can be no return to business as usual in these unprecedented circumstances. The interconnected nature of our financial institutions substantially increases systemic risk if any one financial institution fails. The capacity of private sector institutions to rescue each other has proved to be limited. Governments around the world have therefore acted on an unprecedented scale to support a financial system that has been shaken to its foundations.
There will be long-term implications for the relationship between Government and the financial sector at both national and international levels. The Chancellor has made it clear that we need to return to the issues of regulation and transparency, and to the design of the international financial architecture, which must be made fit for purpose in a more globally interdependent world. We also need progress on a world trade deal and the rejection of a beggar-thy-neighbour protectionism, which changed the great stock market crash of 1929 into the great depression and the global calamity of the second world war.
Unlike the Conservatives when they were last in government dealing with a recession, the Labour party in government does not believe that unemployment is a price worth paying; nor does it believe that if it is not hurting, it is not working. We believe it right to stand alongside people and use the power of the state to help them through difficult times, and we are determined to help people and businesses with targeted support. Therefore, at the last Budget we gave a tax cut worth £120 to all 22 million basic-rate taxpayers. We delayed the planned fuel duty increase, at an annual cost of £1 billion. We helped 9 million households by making additional winter fuel payments of £50 for the over-60s and of £100 for
the over-80s, on top of current payments. Since the Budget, we have also announced substantial help for people to insulate their homes and reduce their energy bills.
It is inevitable that the global financial crisis should have some effect on the number of people who have difficulty repaying their mortgages, but the number of repossessions for the whole of 2007 is about a third of the levels of the early 1990s, and data from the Council of Mortgage Lenders show that the number of properties taken into possession in the first half of 2008 equates to 0.16 per cent of all mortgages—less than half the rate seen in the early 1990s. However, we are not complacent, and I recognise that each and every repossession is a tragedy for the people involved.
Chris Huhne: Will the Minister give way?
Angela Eagle: I have given way to the hon. Gentleman once already, but I shall do so again.
Chris Huhne: I am very grateful to the Minister for giving way again. As she knows, the level of repossessions took some time to build up in the crisis of the early 1990s. Is she saying that there will be no further increase in the level of repossessions? Given what happened when we debated this matter in April—my hon. Friend the Member for Twickenham (Dr. Cable) has quoted her as saying that there was no possibility of a recession, and that there was scaremongering on the Liberal Democrat Benches—why should we take her at all seriously now, when she was so comprehensively wrong then?
Angela Eagle: I noticed the quote from the hon. Gentleman in April when talking about the hon. Member for Twickenham (Dr. Cable)—that he was one of those gloomy economists who always think that a glass is half empty, rather than half full. I am not going to be gloomy about the UK economy; rather, I will repeat what I was saying when the hon. Member for Eastleigh (Chris Huhne) intervened. We are not complacent. We recognise that each and every repossession is a tragedy for the people involved. I am certainly not going to predict—the Government do not predict—the number of repossessions; the Council of Mortgage Lenders publishes its figures. However, we are determined to do what we can to ensure that we can mitigate the problems that lead people to fall into arrears and face repossession. I will deal in a minute with some of the announcements that we have made to that effect.
Kelvin Hopkins: I thank my hon. Friend for giving way yet again; may I reinforce her point about repossessions? Before the 1997 election, my constituency had the highest level of repossessions in the country, as a result of which I had almost the largest swing to Labour during that election.
Mr. Jeremy Browne (Taunton) (LD): It was your own talents.
Kelvin Hopkins: If only! It was entirely due to the catastrophic effect of Conservative policies on my constituents.
Angela Eagle: My hon. Friend is treating us to many pearls of wisdom today, and that was another one.
In September, we announced a range of new measures to support thousands of vulnerable home owners. Help newly available as a result of these announcements includes a £200 million mortgage rescue scheme that will help up to 6,000 households avoid the trauma of repossession over the next two years. From 1 January, we will reform the help available to home owners who lose their jobs, so that their mortgage interest is paid after 13 weeks, rather than after the 39 weeks that they would previously have had to wait for help. We have brought forward £400 million of Government spending to deliver up to 5,500 new social rented homes at affordable prices while the private sector market remains weak.
The Government believe that repossessions should be a last, not a first, resort, so we have asked mortgage lenders to review their voluntary arrangements for supporting borrowers who are facing difficulties. The Council of Mortgage Lenders has produced its guidelines, and the Finance and Leasing Association is preparing best practice guidance for lenders, which will be published later this year.
On 22 October, the Prime Minister announced new guidance for the judiciary to halt court action on repossessions unless alternative options to help the home owner have been fully examined. The new court protocols set out clear guidance on the steps that lenders are expected to take before bringing a claim in the courts, to ensure that repossessions are indeed a last resort. Lenders will now be expected to demonstrate that they tried to discuss and agree alternatives to repossession when borrowers got into trouble with their mortgage payments. If a case reaches court, lenders will be required to tell the court precisely what they have done to comply with that protocol.
The recent cut in the Bank of England base rate has been widely welcomed. The UK now has its lowest interest rates since 1954, which will provide some welcome relief to home owners who are struggling with mortgage repayments. In the context of responsible lending, we want customers to benefit from the rate cut, and where banks are benefiting from cheaper borrowing, we want that to be passed on to their customers, too.
Matthew Taylor: There are serious shortages of affordable housing, and fewer houses are being built at the moment. Government policy instructs local councils to reduce the leasing of private properties in order to house people in housing need, on the basis that that is a temporary solution. Right now, a temporary solution of that sort would help to meet not only the housing needs of a large number of people, but the need to cover mortgage costs of those who have these properties and would like to let them out. There might be a solution that meets the needs of two groups: those facing the loss of their property, and the many who are in housing need.
Angela Eagle: We will be looking to build further on our announcements of help to home owners as the situation progresses, and we will bear the hon. Gentleman’s suggestions in mind.
Although the world economic climate is uniquely challenging, pessimism about our prospects is neither sensible nor reasonable. We need to be not only realistic
about the difficulties we face, but confident that we can get through them. The UK is better placed to weather the global economic storm than it was in the 1970s, 1980s or the 1990s. Following last week’s Bank of England actions, the UK has its lowest interest rates since 1954, and we also have low inflation. Both interest rates and inflation are well below the double-digit levels that were a feature of previous recessions.
Jo Swinson (East Dunbartonshire) (LD): The Minister says that we are well placed to weather the economic storm, but the huge level of over-indebtedness that many families face means that they are not well placed to do so—as the individual insolvency figures for Scotland, which were released on Friday, showed when they rose by 26 per cent. between quarter two and quarter three. Families and individuals across Scotland—and, indeed, the rest of the UK—are struggling. How are those people, who face such high levels of debt because of irresponsible lending, well placed to weather this storm?
Angela Eagle: I was talking not about individuals but about the economy as a whole when I made my points about interest rates and so on. We have to deal with individual problems as they come to our attention. Clearly, some people are struggling with their debts, which is why we made our announcements to support them. The hon. Lady must not think that I was applying what I said about interest rates and inflation levels to a particular individual in trouble in Scotland—I was not. We recognise that individuals are facing difficulties, and this Government are determined to be alongside them, helping them to cope during this downturn.
Rob Marris: We need fiscal stimulus in the economy and the Government should borrow to provide it. Will my hon. Friend confirm that the accumulated national debt in the UK as a proportion of gross domestic product is far lower than that in any other G7 country except Canada?
Angela Eagle: Yes, that is the case. Scaremongering about our indebtedness or readiness to deal with these difficult circumstances, as the Opposition do, does not help.
Chris Huhne: Will the Minister give way?
Angela Eagle: No, I have given way to the hon. Gentleman lots of times.
Angela Eagle: It is churlish of the hon. Gentleman to say that I am frit when I have given way to him so often. Perhaps I am getting a bit fed up of giving way to him and this time I am not going to do so. Our labour market has 3 million more jobs than it did—
Chris Huhne: Will the Minister give way on that point?
Mr. Deputy Speaker (Sir Michael Lord): Order. I think that the Minister has made it perfectly plain that she is not going to give way.
Angela Eagle: Our labour market has 3 million more jobs than it did when we came into government and we are determined to use the reformed Jobcentre Plus service to help anyone facing redundancy to find new work opportunities as quickly and effectively as possible. Thanks to decisions that we have made since 1997, public debt remains low. That means that we can provide targeted support to those who need it most in these difficult times and protect vital investment in our infrastructure—investment that in previous downturns the Conservative party sacrificed and that will underpin our future growth.
We have taken the long-term decisions to boost our competitiveness on energy, planning, transport, housing, science, skills and digital technology. As the International Monetary Fund recently stated:
“For over a decade, the United Kingdom has sustained low inflation and rapid economic growth—an exceptional achievement....fruit of strong policies and policy frameworks, which provide a strong foundation to weather global”
challenges. [ Interruption. ] Opposition Members are saying that I am quoting the IMF—I am, and I am as aware as they are of the IMF’s recent comments on our prospects for growth next year. If Opposition Members were to look at the IMF’s mid-term forecast, they would see that it put us second after only Canada for growth in the 2010 to 2013 period. They should take account of all the IMF’s forecasts, rather than taking tiny bits of the forecast out of context.
We are determined to demonstrate that we can help our economy weather this global financial storm and to get through it in the best possible way, so that we can take advantage of the many opportunities as economies seek to recover.
4.32 pm
Mr. Philip Hammond (Runnymede and Weybridge) (Con): We strongly support the sentiment in the first half of the Liberal Democrat motion, which identifies the fact that the asset price bubble and the over-borrowing that has occurred in the UK are a major contributor to the problem that we face. That problem was not simply made elsewhere and inflicted on an entirely innocent bystander—the Prime Minister. We agree that one of the principal concerns of the Government and this House should now be to get help to families and businesses that are struggling with the short-term challenges of recession.
We also agree—I think that this is implicit in the Liberal Democrat motion—that the first response to the recession should be a monetary policy and that any targeted tax cuts to support families and businesses must be fully funded if we are not simply to burden future generations with the consequences of problems that we have created but do not want to shoulder. Indeed, the Exchequer Secretary came close to supporting that view when she said that we must look through the immediate challenges to the medium term. That strongly suggests to me that she is beginning to see the wisdom of resisting the temptation to borrow and spend her way out of the recession.
We part company from the Liberal Democrats, however, on their prescription, which is that old chestnut—the easy option of tax cuts for everyman, funded by amorphous wealthy individuals, or as the leader of the Liberal
Democrats described them today, top earners. That is too easy. We have reached the point in this economic debate where difficult decisions have to be taken, although I know that is not something the Liberal Democrats specialise in. Who are those wealthy individuals or top earners? They are the usual victims. [Hon. Members: “You.”] Hon. Members are right. According to the Liberal Democrat proposals, every one of us is one of those top earners or wealthy individuals—anybody earning £40,800 or more.
The Liberal Democrats want to increase tax on pensions for people on middle incomes by withdrawing the benefit of higher rate tax relief on pension contributions for those earning £40,800 or more. Those people are headmasters, police inspectors and senior nurses—hundreds of thousands of hard-working families across the country. The Liberal Democrats want further to discourage entrepreneurship by taxing capital gains as income. They propose another £20 billion of unidentified spending cuts to support their tax cut programme, but they cannot tell us how they will be achieved. In fact, the situation is worse than that; it is not just that they cannot tell us, they will not tell us.
Some of us will remember when the leader of the Liberal Democrats was interviewed on “Newsnight” immediately after their party conference. Once he got to £5.5 billion of the £20 billion, Jeremy Paxman asked, “Where’s the rest?” His answer was:
“well, I’m simply not going to tell you the rest.”
The Lib Dems bring a whole new dimension to the concept of political transparency.
The Liberal Democrats are all over the place on tax. They are also all over the place on the Bank of England. The hon. Member for Twickenham (Dr. Cable) claims guru status for having called for a 2 per cent. base rate cut by the Bank of England, but on 15 September he told his party conference:
“The Government must not compromise the independence of the Bank of England by telling it to slash interest rates.”
Then he got on the train back to London and spent the next three weeks going around the television studios calling precisely for a cut in interest rates— [ Interruption. ] That is the point: while those of us who belong to parties that are either in government or aspire to be in government studiously try to respect the independence of the Bank of England, the hon. Gentleman apparently regards himself as free to indulge in wildly populist and contradictory demands on our television screens.
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